Re Barnes; ex parte Barnes v Makhoul

[1994] FCA 699

RE: ROBIN BARNES, ALSO KNOWN AS ROBIN LESLIE MAKHOUL
EX PARTE: ROBIN BARNES v. JACQUES EZZAT MAKHOUL
No. BN793 of 1994
FED No. 699/94
Number of pages - 7
Bankruptcy
(1994) 53 FCR 169

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
COOPER J

CATCHWORDS

Bankruptcy - preliminary objections to form of bankruptcy notice - foreign judgment creditor - obligation of judgment creditor to nominate address in Australia at which payment can be made - no requirement that bankruptcy notice nominate agent of judgment creditor to receive payment - bankruptcy notice must require payment in accordance with the terms of the judgment.

Bankruptcy Act 1966 Sections 41 and 42

James v. Federal Commissioner of Taxation (1955) 93 CLR 631
Re Buchanan; Ex parte Mervac Finance Limited (1991) 31 FCR 135
Re Martin; Ex parte Government Employees Finance and Industrial Loan Corporation (1969) 13 FLR 353
Re Haritos; Ex parte Hill (1968) 15 FLR 378
In re Stogdon Ex parte Leigh (1895) 2 QB 534
In re Beauchamp Ex parte Beauchamp (1904) 1 KB 572
In re Persse (1911) 55 Sol Jo. 314
In re a Debtor (1912) 1 KB 53

HEARING

BRISBANE, 29 August 1994
#DATE 30:9:1994

Counsel for Applicant: W. Stephens

Solicitors for Applicant: Stephen Jones and Leach

Counsel for the Respondent: D. Lewis

Solicitors for the Respondent: John K. Harris

ORDER

1. The preliminary objections to the form of the bankruptcy notice are dismissed.

2. The application is adjourned to the bankruptcy list of 1 November, 1994 for hearing of the substantive application.

3. The judgment debtor is ordered to pay the judgment creditor's costs of and incidental to the hearing of the preliminary objection to be taxed, if not agreed.

Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

COOPER J On 6 July, 1994 the judgment debtor was served with a bankruptcy notice which relevantly stated:-

"WHEREAS JACQUES EZZAT MAKHOUL of 2/33 Riviera Road, Miami in the State of Queensland (hereinafter referred to as 'the judgment creditor') has claimed that the sum of $41,000.00 (Forty-one thousand dollars) is due by you to the judgment creditor under a final judgment obtained by the judgment creditor against you in the District Court of Queensland (held at Brisbane) on the 27th day of October 1992, being a judgment the execution of which has not been stayed.

THEREFORE TAKE NOTICE that within 28 days after service of this Notice on you, excluding the day on which this Notice is served on you, you are required:

(a) to pay the sum of $41,000.00 so claimed by the judgment creditor to the judgment creditor

(b) to secure the payment of the sum referred to in the last preceding paragraph to the satisfaction of the Federal Court of Australia or other court exercising Federal jurisdiction in bankruptcy, pursuant to the provisions of Section 27 of the Bankruptcy Act 1966, or the judgment creditor, or compound the sum so specified to the satisfaction of the judgment creditor".

The notice concluded:-

"This Notice was issued on the application of: JACQUES EZZAT MAKHOUL whose address for service is:

Messrs. Stephen Jones and Leach Solicitors

Rochedale Shopping Village Underwood Road

Rochedale, Queensland 4123".

1. It is common ground that Jacques Ezzat Makhoul is a resident of Al-Ain, Abu Dhabi, United Arab Emirates.

2. On 15 August, 1994 the judgment debtor applied to have the bankruptcy notice set aside and for a declaration that she has a counterclaim, set-off or cross-demand of a kind referred to in paragraph 40(1)(g) of the Bankruptcy Act 1966.

3. On the return of the application the parties sought a determination of a preliminary point, namely that the bankruptcy notice in the form in which it was served was invalid because the address shown on the notice is not that of the judgment creditor who resides out of Australia, and the notice does not identify an agent or other person in Australia who is authorised to receive payment and give the judgment debtor a discharge.

4. The judgment creditor submits that the notice is in accordance with the prescribed form (Form 4) and that by Rule 8 of the Bankruptcy Rules a notice is to be in that form. Additionally it was submitted that an address in Australia, namely "2/33 Riviera Road Miami" was given and that I ought to construe the notice as including by implication that a statement that there was at that address an agent authorised to receive payment.

5. The statutory form provides:-
   

"WHEREAS (name and address of judgment creditor) (hereinafter referred to as 'the judgment creditor') has claimed that the sum of $... is due by you to him under a final judgment (or order) obtained by him against you in the ... Court of ... on the ... day of ..., 19.., being a judgment (or an order) the execution of which has not been stayed:

THEREFORE TAKE NOTICE that within ... days after service of this notice on you, excluding the day on which this notice is served on you, you are required -

(a) to pay the sum of $... so claimed by the judgment creditor to (here insert 'the judgment creditor' or, if the judgment or order requires payment to be made to a court or a person other than the judgment creditor, the name and address of the court or the other person to whom payment is required to be made); or

(b) to secure the payment of the sum referred to in paragraph (a) to the satisfaction of the (name of the court) or the judgment creditor (or his agent whose name and address are ...) or compound the sum so specified to the satisfaction of the judgment creditor (or his agent):

AND FURTHER TAKE NOTICE that if, within the period set out above, you fail either to comply with either of the abovementioned requirements of this notice or to satisfy the (here insert the name of the Court) that you have a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph (a), being a counter-claim, set-off or cross demand that you could not have set up in the action (or proceeding) in which the judgment (or order) was obtained, you will have committed an act of bankruptcy on which bankruptcy proceedings may be taken against you".

1. The judgment debtor submitted that the effect of the decision of Beaumont J in Re Buchanan; Ex parte Mervac Finance Limited (1991) 31 FCR 135 was to require that the bankruptcy notice nominate an agent within the jurisdiction to whom payment could be made. A careful reading of his Honour's reasons, in my view, does not support such a contention. In Buchanan, the judgment creditor in the preamble to the bankruptcy notice identified itself as being "of 1 St. Pauls Churchyard London, United Kingdom (hereinafter referred to as 'the judgment creditor')". In paragraph (a) of the statutory form no address in Australia was given. In paragraph (b) an agent was specified and an address given. After a review of the authorities, Beaumont J concluded (at 141-142):-
   

"It is true, as the judgment creditor contends, that the notice is in the prescribed form. But the prescribed form does not, in terms, address the possibility that a judgment creditor may be a foreign person. In that event, it is necessary to adapt the prescribed form so as to provide, in the case of payment, for an appropriate method of payment: see Downey v. Pryor (1960) 103 CLR 353 at 362, per Kitto J. As the decided cases cited above show, in the case of a foreign corporation, an appropriate method would be to require payment to an agent of the judgment creditor at an address within the Commonwealth".

His Honour's observation, however, must be read in the context of the requirements of the Bankruptcy Act 1966 ("the Act") and the authorities to which his Honour refers.

1. Section 41(1)(a) of the Act requires that a bankruptcy notice shall be in the prescribed form. Section 41(2) of the Act provides:-
   

"41(2) The prescribed form of bankruptcy notice shall be such that the notice:

(a) requires the debtor named in it, within a specified time (being the time referred to in subparagraph 40(1)(g)(i) or (ii), whichever is appropriate) to:

(i) pay the judgment debt or sum ordered to be paid in accordance with the judgment or order; or

(ii) secure the payment of the debt or sum to the satisfaction of the Court or the creditor or his agent, if any, specified in the notice or compound the debt or sum to the satisfaction of the creditor or his agent, if any, specified in the notice; and

(b) states the consequences of non-compliance with the requirements of the notice".

The judgment in the present case is in the following terms:-

"The Defendant having filed an Entry of Appearance and Defence herein and His Honour Acting Judge Griffin having ordered it to be struck out, it is this day adjudged that the Plaintiff recover against the said Defendant the sum of FORTY-ONE THOUSAND DOLLARS ($41,000.00) for claim".

1. The judgment does not direct payment of the sum of $41,000.00 at any particular place or to any person other than the judgment creditor.

2. The ordinary rule is that it is the duty of a judgment debtor to find the judgment creditor and pay the creditor the amount of the judgment, provided that the judgment creditor is in Australia (James v. Federal Commissioner of Taxation (1955) 93 CLR 631 at 641 - 642).

3. For the purposes of section 42 of the Act, it is sufficient if a foreign judgment creditor provides in the notice an address in Australia where the judgment creditor or some person duly authorised on behalf of the judgment creditor will be available at reasonable hours to receive payment and to give a discharge in terms of paragraph (a) of the bankruptcy notice (James v. Federal Commissioner of Taxation at 639; Re Haritos; Ex parte Hill (1968) 15 FLR 378 at 379-380).

4. The importance of the bankruptcy notice requiring payment in accordance with the terms of the judgment or order in the context of a foreign judgment creditor was made clear by Gibbs J in Re Martin; Ex parte Government Employees Finance and Industrial Loan Corporation (1969) 13 FLR 353. His Honour said of section 41(1)(a) of the Act (at 355):-
   

"The effect of these provisions is that although the notice may specify an agent to act on behalf of the creditor in relation to the question whether the payment of the debt is secured to his satisfaction, it must require the debtor to pay the judgment debt in accordance with the judgment. A notice that requires the debtor to pay the debt otherwise than in accordance with the judgment will be bad (see In re H.B. (1904) 1 KB 94; In re a Debtor (1908) 2 KB 692; Re a Debtor; Ex parte Bolam (1909) 26 WN

(N.S.W.) 78 and James v. Federal Commissioner of Taxation (1955) 93 CLR 631.) In the present case the judgment was in favour of the corporation but the notice required the debtor to pay the amount claimed, not to the corporation, but to its agent, Mr. Edwards.

It is clear that if the creditor had been an Australian corporation the notice in the present case would have been bad. By the judgment the debtor is obliged to pay the creditor and a requirement to pay the judgment debt to an agent would certainly not have been in accordance with the judgment if the creditor had been within Australia. However, on behalf of the creditor it is submitted that since the corporation is a foreign corporation and is not within Australia, the effect of the judgment properly understood is to oblige the debtor to pay the agent, who is the corporation's representative in Australia.

.....

In my opinion, when a judgment is given in favour of a foreign creditor, although it is right to say that the judgment does not require the debtor to pay the creditor outside Australia, it is wrong to say that the obligation imposed by the judgment is to pay an agent of the creditor within Australia. The truth is that the obligation imposed is to pay the creditor if he is within Australia but presence within Australia by an agent will be sufficient. To require the debtor to pay an agent is therefore not to require him to pay in accordance with the judgment.

On behalf of the petitioning creditor it was submitted, correctly, that in deciding whether a bankruptcy notice requires payment in accordance with the judgment, the test is not how the debtor may discharge his obligation, but how the judgment requires him to discharge it. For example, although a debtor against whom judgment is given in the District Court may get rid of his obligation if he tenders payment to the judgment creditor and the tender is accepted, a bankruptcy notice requiring payment to the creditor will not be valid, since the judgment requires payment to the registrar of the court (In re a Debtor (1908) 2 KB 692; Re a Debtor; Ex parte Bolam (1909) 26 WN (NSW) 78.)

.....

Where a foreign creditor has obtained a judgment which obliges the debtor to pay him in Australia, it therefore seems to me that the notice should require payment to the creditor, and should give as the address of the creditor a place in Australia at which there is in fact a person duly authorized to receive payment, but that the notice ought not to specify the agent, and ought not to require payment at a particular place".

1. The notice in Buchanan did not in paragraph (a) expressly give an address within the jurisdiction for the judgment creditor. However Beaumont J was prepared to infer that as a matter of construction the agent identified in paragraph (b) was authorised to receive payment. That, however, is not this case. Beaumont J did not purport to do other than apply the authorities to which he referred which included the decisions of Gibbs J in Re Haritos and In Re Martin and the High Court decision in James. There is nothing in the judgment of Beaumont J, in section 42 of the Act, or in the authorities referred to which would require the insertion of the name and address of an agent for a foreign judgment creditor in the bankruptcy notice. Indeed, the section and the authorities are all against such a contention because it would be to require payment other than in accordance with the terms of the judgment or order.

2. The form of the bankruptcy notice in issue is correct and the statement of an address within Australia in paragraph (a) without more is sufficient. Whether the address given is a proper address in the sense that as a matter of fact there was at "2/33 Riviera Road Miami" during the 28 days after service of the bankruptcy notice, the judgment creditor or some person duly authorised to receive payment and give a discharge is a different issue. It is not sufficient that the judgment creditor is known at that address if payment and discharge cannot be effected there by payment to the judgment creditor or an authorised agent (In re Stogdon Ex parte Leigh (1895) 2 QB 534; In re Beauchamp Ex parte Beauchamp (1904) 1 KB 572; In re Persse (1911) 55 Sol Jo. 314; In re a Debtor (1912) 1 KB 53; James at 641-643). However, any challenge to the address on this basis is one of substance and not form and was not argued before me.

3. A further objection was argued by the judgment debtor, namely that the bankruptcy notice understates the sum demanded. The contention is that the solicitors for the judgment creditor have demanded the judgment debt plus costs, thereby contending that the debt is greater than $41,000.00. The objection is without substance. The sum of $41,000.00 specified in the bankruptcy notice is the sum specified in the judgment. There is no judgment for costs. The judgment and the bankruptcy notice in what is demanded by way of payment are identical and accord with section 42 of the Act.

4. The preliminary objections to the form of the bankruptcy notice fail. The application is adjourned to the bankruptcy list of 1 November, 1994 for hearing of the substantive application.

5. The judgment debtor is ordered to pay the judgment creditor's costs of and incidental to the hearing of the preliminary objection to be taxed, if not agreed.